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Canaccord sees System1 'turning a corner'
After marketing agency System1 posted better than expected full-year results on Friday, analysts at Canaccord Genuity saw scope for material upside over the next year.
System1 saw gross profits fall 18% to £22.2m, in line with pre-close guidance, while pre-tax profits came in at £2.1m, at the top of its guidance range.
Canaccord said this year was a tough one for SYS1, as management took the tough decision to accelerate its launch of scaleable ad/innovation testing products, effectively splitting consulting-style services to data.
However, looking forward, Canaccord said, "The shift towards more automated, high speed/scale products should provide a more stable revenue mix, and the ability to drive up margins with scale. And products are aimed at generating efficiency in marketing spend, which should resonate with clients"
The broker also noted there had been some more positive signs, with fourth-quarter revenues up 18% on Q3 and cost reductions put into effect throughout the second half in the form of dropping its headcount 5%, but overall, Canaccord said it was "too early to call the turn".
Canaccord reiterated its 400p target price and its 'buy' rating on System1's stock.
"SYS1 shares were hit hard by last year's warnings, but we think it is turning a corner," Canaccord stated.